LPG Subsidy might get Taxed soon

[Navjot Singh]

The money that the government transfers directly to consumers' bank accounts as LPG subsidy may well be considered as an income and taxed, say tax experts. There are no guidelines currently on taxing this type of subsidy payouts, and the income tax department may take a view on whether or not to claim a part of it which can ofcourse, be challenged in the court of law.At present, the price of a cylinder of LPG is about Rs 1,050 and the government pays a subsidy of Rs 630 on it, depositing that amount in the account of consumers in places where the direct subsidy transfer system is already in place.An individual who receives nine cylinders she is eligible for a year gets a total subsidy of Rs 5,670 in a year. The tax on this could be as high as about Rs 1,700 a year, if the individual comes under the highest tax bracket of 30%. But there is unlikely to be any impact on those who don't have taxable income.

Source

 

[Sushubh]

Subsidy pe tax? Subsidy taxable income? What next? Tax on charities?

 

[Navjot Singh]

According to Business Standard, its a practice.

Subsidies dished out by government are of two kinds, capital and revenue. Capital subsidy is that which is given for set up a manufacturing unit or any other activity which the government feels will help increase employment and investment. Revenue subsidies, on the other hand are those that are used to supplement income and improve profits.Revenue subsidies are taxed by income tax authorities. There a number of precedents where the court has intervened and allowed exemption in capital subsidy but insisted on revenue subsidy. Bombay High Court has clarified that doubt in the case of Commissioner of Income Tax versus Chaphalkar Brothers in an order dated June 8, 2011 relying on the Supreme Court judgement in Sahney Steel and Press Works Ltd versus Commissioner of Income Tax judgement.

 

[Sushubh]

This would probably drive my dad a few kilometers more away from Aadhaar.

 

[genie]

The government should be encouraging people to use LPG more because it can reduce the country's dependence on other energy. it is cleaner than coal and oil, abundantly available and can be used in various applications like building heating, gensets, vehicles, farm and industrial machinery, etc.